Oil Hits $100 for First Time Ever: Bad Way to Begin 2008 for Consumers

Source: American Coalition for Ethanol | Jan 03, 2008

Crude oil prices on the New York Mercantile Exchange soared to $100 Wednesday, Jan. 2, and closed at a record $99.62, underscoring the urgent need for cost-effective renewable fuels such as ethanol.

“Consumers were welcomed to the new year with crude oil prices reaching a record $100/barrel for the first time ever, causing the price tag for our nation’s expensive addiction to foreign oil to soar to more than $1 billion/day,” says Brian Jennings, executive vice president of the American Coalition for Ethanol (ACE). “For the sake of the nation’s economic health, our new year’s resolution must be to put the brakes on this costly and risky reliance on oil and accelerate our use of domestically produced ethanol.”

Fortunately, the renewable fuels standard (RFS) included in H.R. 6, the Energy Independence & Security Act signed by President Bush on December 19, is a major step toward relief from this expensive reliance on oil. The RFS calls for an increasing schedule of ethanol use nationwide, beginning with a minimum of 9 billion gallons in 2008 and moving up to 36 billion gallons by 2022, with grain-based and cellulosic ethanol together making up the total. As a result of this forward-looking policy, cost-effective and homegrown biofuels will replace the use of fossil-fuel-based transportation fuel.

“High oil prices hurt every sector of the American economy, making it more expensive to heat our homes, feed our families and drive to and from work and school. As we begin 2008, the bad news for consumers is that ongoing geopolitical turmoil and jittery market fundamentals could result in oil prices to rise significantly above $100/barrel this year," Jennings says. "But the good news for consumers is that ethanol is here today as a commercially available, cost-effective alternative fuel. The more we can increase consumer access to ethanol-blended fuel, the better off our economy will be. Increasing the number of flexible-fuel vehicles and the availability of E85, as well as approving the use of mid-range ethanol blends such as E20 and E30 for standard autos, will further insulate consumers against the pinch of $100 oil."

The bad news of high oil prices: The U.S. imports around 12 million barrels of oil per day, resulting in more than $1 billion/day being shipped to foreign oil suppliers.

In spite of the high oil prices, U.S. consumption of gasoline has continued to increase by about 2% annually.

High energy prices directly impact the cost of consumer goods that are dependent upon energy for processing, packaging and transportation.

As of 2005, petroleum imports accounted for 31% of the U.S. trade deficit -- a cost of $220 billion. The Department of Commerce estimates that every $1 billion of trade deficit costs the nation 19,100 jobs.

The good news of ethanol availability:

The use of 36 billion gallons of ethanol, as scheduled in the new RFS, will be enough to drive America’s transportation sector without any oil for at least two full months each year.

Today more than 50% of America’s gasoline contains ethanol.

While no new gasoline refineries have been built in the last 30 years, more than 130 ethanol production facilities have come online and more than 70 new facilities are under construction, providing critical supplies of cost-effective renewable fuel for consumers.

For every barrel of ethanol produced, 1.2 barrels of petroleum are displaced at the refinery.

The combination of reduced farm program costs and increased income tax revenues results in a net gain to the U.S. Treasury of $1.30/gal. of ethanol produced.

The American Coalition for Ethanol (ACE) is the nation’s largest ethanol association with nearly 2,000 grassroots members nationwide. For more information about ethanol, visit www.ethanol.org[2]